Impairment loss allowance on performing assets
Should impairment loss allowance be provided on performing assets or standard assets at the time of recognition of such assets?
The expected credit loss is required to be applied on day one for all types of financing assets. The expected credit losses are the present value of all cash short falls over the expected life of the financial instrument. The credit loss is the difference between all contractual cash flows that are due to an entity as per the contract and all the cash flows that the entity expects to receive, discounted at the original effective interest rate. As per the new impairment model, impairment losses should be recognised even for financial assets that are newly originated or acquired.
